Vietnam Faces Risk of Prolonged Slow Growth: World Bank

Vietnam’s GDP growth this year projected to reach 5.3%, compared with 5.2% in 2012, World Bank says in report released today in Hanoi. * Vietnam economic growth in 2014 seen at 5.4% * Vietnam 2013 inflation seen at 8.2%, 2014 inflation at 7.9% * Vietnam 2013 fiscal deficit seen at 4% of GDP, current-account surplus at 5.6% of GDP * Vietnam’s macroeconomic conditions are improving, report says, citing moderate inflation, stable exchange rate, increased reserves, reduced country risks * Vietnam decision to adjust exchange rate rather than continue to defend currency was a “welcome move” * Foreign reserves have increased to 2.8 months of imports at end of 1Q from 1.6 months in 2011 * Plan to delay requiring banks to use stricter standards for bad debt gives banks room to “flexibly interpret the loan classification system and to underreport NPLs” * Vietnam “government’s approach to restructuring its banking sector is considerably different from what is generally considered as good practice,” report says, citing lack of systemic effort to audit key financial institutions, decision not to use taxpayer money *While financial sector is fragile, risk of systemic crisis has receded *Inflation has stabilized; price gain expectations have not, with core inflation averaging about 10% and administrative price hikes likely to continue in future *Progress in reforming state-owned enterprises largely limited to preparation of regulations, many of which have yet to be approved, and to development of restructuring plans by SOEs

To contact the reporter on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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